Adam Townsend - CBS Corp. Leslie Moonves - CBS Corp. Joseph R. Ianniello - CBS Corp.

Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC Jessica Jean Reif Cohen - Bank of America Merrill Lynch Alexia S. Quadrani - JPMorgan Securities LLC Anthony DiClemente - Nomura Instinet Michael Morris - Guggenheim Securities LLC Doug Mitchelson - UBS Securities LLC John Janedis - Jefferies LLC David W. Miller - Loop Capital Markets LLC Laura Martin - Needham & Co. LLC Steven Cahall - RBC Capital Markets LLC Marci L. Ryvicker - Wells Fargo Securities LLC

Good day, everyone, and welcome to the CBS Corporation first quarter 2017 earnings release teleconference. Today's call is being recorded. At this time, I'd like to turn the conference over to the Executive Vice President of Corporate Finance and Investor Relations, Mr. Adam Townsend. Please go ahead, sir. Adam Townsend - CBS Corp.: Thank you, Gwen. Good afternoon, everyone, and welcome to our first quarter 2017 earnings call. Joining us with today's remarks are Leslie Moonves, our Chairman and CEO; and Joe Ianniello, our Chief Operating Officer. Following Les and Joe's discussion of the company's performance, we will open the call up to questions. Please note that statements on this conference call relating to matters which are not historical facts are forward-looking statements which involve risks and uncertainties that could cause actual results to differ. Risks and uncertainties are disclosed in CBS Corporation's SEC filings. Reconciliations for non-GAAP financial information related to this call can be found in our earnings release or on our website at cbscorporation.com. A webcast of this call and the earnings release related to today's presentation can also be found on our Investor section of our website. With that, it's my pleasure to turn the call over to Les. Leslie Moonves - CBS Corp.: Thank you, Adam, and good afternoon, everyone, and thank you for joining us. I'm pleased to report that CBS delivered a very healthy first quarter. EPS was $1.09, up 15%, representing the 29th consecutive quarter of EPS growth. And revenue came in at $3.3 billion, which was quite an achievement because we were going up against a quarter a year ago when we had the Super Bowl and an extra NFL playoff game. When you exclude those two games, revenue would have been up high single digits for the quarter. CBS' strong performance is the direct result of our clear strategy to diversify our revenue. During the quarter, affiliate and subscription fees grew 17%, and content licensing and distribution grew 16%. Going forward, all three of our main types of revenue are set up for success in the quarters ahead. First, affiliate and subscription fees will continue to grow rapidly from multiple sources led by retrans and reverse comp which is on track to be up about 25% in 2017. This will put us more than halfway to our goal of achieving $2.5 billion in this revenue source by 2020. Affiliate and subscription fees are also beginning to benefit meaningfully from CBS All Access and Showtime OTT. On both services, the combination of original programming and leading library titles is driving our growth, and we are pacing ahead of our goal of 8 million subscribers combined by 2020. So far, we have been selling each product individually. Starting next week, in addition to each being available on its own, we will begin offering All Access and Showtime as a combined package for the very first time. And yes, the skinny bundles we've long told you about are now here. Last month, CBS and Showtime launched on Google's YouTube TV, and Showtime debuted on Sling TV. And just yesterday, CBS and Showtime launched on Hulu's new live TV service as well. These new deals will rapidly become a contributor to our affiliate and subscription fee revenue here in 2017. As these new players continue to come on the scene, it's the must-have content that will thrive. This is when the marketplace will separate the wheat from the chaff. And remember, as we've said many times, for any bundle to be truly successful, it must have CBS. We are not being affected in any way by any changes in subscription numbers throughout the industry. Next, revenue from content licensing and distribution is also poised for continued success. Later this year, three of our hit TV series, NCIS: New Orleans, Madam Secretary, and Scorpion, will begin to be licensed in domestic syndication. Together, this represents about 200 episodes of shows that we can monetize, and they'll be coming to market at just the right time. There has been a barrage of new original programming on cable networks these last few years. Some of it has worked. Much of it has not. For many programmers, our proven content presents a better business model than the risk of another failed original. In fact, several of the best performing cable networks recently achieved their growth largely thanks to the reliable performance of shows in the CBS arsenal. From NCIS to the Ghost Whisperer to Beverly Hills 90210, CBS-owned shows are boosting cable channels in a big way. Similarly, SVOD players also continue to covet premium off-network content in order to attract new subs with well-known franchises. Meanwhile, internationally we're seeing strong demand as well, and our licensing revenue is climbing as we continue to create and own more series from our studio. And finally, in advertising, this is an exciting time of year for us with the upfront coming in less than two weeks. Given the dizzying amount of choices out here, having the largest audience and most stable schedule is more valuable than ever. CBS reaches nearly 10 million viewers on average per night, more than anyone else in broadcast, cable, or streaming. And as Nielsen's new Total Content Ratings validated recently, the combined audience across all platforms for CBS this season is larger than it was 15 years ago when we were only a linear network. So we expect to do very well and we expect another terrific upfront, where we will once again lead the market with strong gains. Meanwhile, measurement is getting better and better all the time, and we're getting paid for more viewing than ever before. Still, at this point, the advertising industry has not yet sufficiently caught up with the new ways people are consuming content. In last year's upfront, we pushed to get over 50% of our ad sales done in C7, which was a very important step. This year, we expect that almost every deal will be C7. And going forward, as more people are watching our programming beyond the 7-day window, there is a meaningful opportunity for capturing new revenue through dynamic ad insertion and other technological advances. Plus, we are moving into a new era where selling off just demographics will be a thing of the past. Better and better audience data is driving a new targeted approach that will be a win-win for us and our clients. So across the board, monetizing our total viewership is a top priority for us. And those of you who follow us know when we set our mind to seeking fair value for our content, we always get it. As you can see, we have tremendous upside ahead across all of our main sources of revenue. This is especially true in the back half of 2017, when our new upfront rates kick in, our three hit series go into syndication, and our new skinny bundle deals really start having an impact. And as we continue to sharpen our core content focus, including the separation of our radio business, we will be better positioned to take advantage of the major growth opportunities before us. It all starts with the CBS Television Network, where we will win the season for the 14th time in 15 years and for the ninth year in a row. We have a deep schedule of big mass-appeal hits every night, including the number one show and number one comedy, Big Bang Theory, which was just renewed for two more seasons, the number one drama NCIS, the number one news magazine 60 MINUTES, the number one new drama Bull, and the number one new comedy Kevin Can Wait. As we gear up to announce our new lineup in two weeks, we are once again in an enviable position. Nineteen series from our number one schedule have already been renewed for next season, and five of those shows were brand-new this year, including two dramas and three comedies. We also own 16 of the 19 shows that we've renewed plus nearly all of the pilots we have in development. So next season's primetime lineup will generate incremental licensing opportunities for us as well as advertising revenue. At the same time, we're also creating more and more series for broadcast, cable, and digital platforms beyond CBS, Showtime, and the CW. We now have shows in production or development at 11 networks and streaming services outside of our company. All of this gives us a bigger and bigger library of content that can be monetized across platforms for years to come. One of the key areas where owning our content has led to new revenue growth is late night. Of course, it doesn't hurt when both of your shows are on a terrific run. In fact, Stephen Colbert and James Corden are the only late-night talk-show hosts on broadcast television to be up in viewers this season. The Late Show with Stephen Colbert has now beaten The Tonight Show for 13 consecutive weeks. You'd have to go back a long, long time to find another streak like that for us. And Stephen's viewers are also growing online, with streaming nearly double what it was last season. The Late Late Show with James Corden is also a big multiplatform hit for us. Its YouTube channel recently exceeded an incredible 10 million subscribers and is now ranked third on YouTube's broadcast TV show channels. In addition, owning The Late Late Show has allowed us to create two new series based on James's segments that will launch later this year, Carpool Karaoke on Apple TV and Drop the Mic on TBS. It's remarkable that in two short years, we have revolutionized late-night TV with a pair of brand-new shows that are both doing incredibly well. Turning to TV sports, CBS Sports, we have just had the second-most-watched NCAA men's basketball tournament in 23 years, and the Final Four was up 37% from a year ago when it was on cable. We have also set new records in streaming and social media mentions. And our March Madness cover gave a lift to All Access subscriptions as well. So you can see why we're very pleased to have this tournament locked up for another 15 years through 2032 and on terms that are profitable for us every single year. As we look ahead to the NFL, we landed one of the most sought-after personalities in the game by signing Tony Romo to join Jim Nantz in our broadcast booth. Having just retired from the Dallas Cowboys, Tony will bring a very current perspective to our coverage and I'm sure all you Giant fans out there will be happy to see him in a CBS blazer rather than a Cowboys' jersey. It should also be a strong season in terms of advertising. NFL ad revenue ended last season on an upswing with solid growth in the first quarter during the playoffs, and this fall we will benefit from an improved Thursday Night Football schedule that features five straight weeks of games at the very beginning of the prime-time television season. We will have stronger match-ups than last year kicked off by the Chicago Bears visiting the Green Bay Packers. Over the news, CBS This Morning is the only network morning news program that is growing viewers, a trend that's been going on for a long time. Over the last five years, CBS This Morning is up 47%, while our top competitors are each down. As a result, the gap between CBS and The Today Show is now down to just 150,000 viewers, the narrowest gap in more than two decades. And in primetime, no other news program can match the success of 60 MINUTES, which has already made Nielsen's top ten 19 times this season and was number one during the last week of the quarter. Not bad for a show celebrating its 50th anniversary next season and it remains a model of consistency for us. Clearly, quality content works in any era. Our digital news network CBSN continues to perform strongly, as well. Online streams were up 59% in this year's first quarter versus last, and it's attracting viewers that are about 20 years younger than those who watch news on broadcast and cable TV. Meanwhile, CBS All Access and Showtime OTT are also reaching younger audiences, and as I mentioned, they're expanding all the time. During the quarter, we debuted The Good Fight, our first original scripted series on All Access. It demonstrated the type of quality programming we're bringing to the service, and we've already picked it up for a second season. And of course, the anticipation for Star Trek: Discovery continues to build. The cast is fantastic. We've already had a couple of episodes in the can that we've seen, so we're very excited for the launch later this fall when we'll also have a full season of the NFL on CBS All Access. Our programming has also helped being the driving force behind the success at Showtime where new seasons of Homeland and Billions helped drive strong double-digit growth in OTT subs during the quarter. And quality programming is leading to more and more deals overseas, as well. Where we used to license individual Showtime titles, we are now able to license the entire Showtime brand. Just yesterday, we announced a deal with CANAL+ in France, meaning that our Showtime portfolio will now be available across all of Western Europe. We are just a few short weeks away from the long-awaited return of Twin Peaks, which is also in high demand around the world having just been licensed in several key global markets. So just as we did with Star Trek: Discovery, we're monetizing our content in the international marketplace even before we launch it here in the U.S. Twin Peaks will join a roster of original series that many consider to be the best there is in premium cable, including Homeland, Billions, Ray Donovan, Masters of Sex, The Affair, and Shameless. And in addition to Twin Peaks next month, we'll also premiere the debut of our newest comedy, I'm Dying Up Here, which is executive produced by Jim Carrey. So we continue to refill the programming pipeline at Showtime quarter-after-quarter. Premium content is also the driving force behind our great results in Publishing, where Simon & Schuster turned in a terrific quarter primarily driven by strong print sales, and there's more to come including new titles from big names like Kevin Hart, Joy Mangano, Tucker Carlson, John Kerry and the incomparable Stephen King. Turning to Local, TV station sales for the NCAA championship game were up 40% from the last time we had the game on CBS two years ago. And, of course, strong and steady growth in retrans along with the changing FCC ownership rules are making our local TV stations more valuable all the time. So across our company, we are reaping the benefits of our strategy, which is to create the content that audiences want and give it to them in all the ways as they want it. Last year at our Investor Day, we laid out our long-term strategy in more detail. We outlined four key pillars of growth that would lead our company to success through 2020 and beyond. These pillars include retrans and reverse comp, over-the-top services, international content sales, and a fourth pillar which is in two parts, skinny bundle and the monetization of delayed viewing. I'm pleased to report that each of these pillars is either right on track or even ahead of our goals. Key to our success over the years has been developing a successful strategy, communicating that strategy, executing that strategy and by doing so, delivering for our shareholders. That's what we've done, and that's what we're doing now. So clearly, we have a very bright future, and I look forward to updating you on our continued progress. Thank you. And with that, I will turn the call over to Joe. Joseph R. Ianniello - CBS Corp.: Thanks, Les, and good afternoon, everyone. As you heard, our first quarter results underscored the strength of our business model. We delivered healthy EPS growth and strong free cash flow, driven by double digit increases in our high margin non-advertising revenue sources, and once again, we did all of this while we continued to invest in our programming as well as our own distribution platforms. So the strategy we laid out for you a year ago is currently paying off. CBS is now a pure-play content company with a diversified revenue base that is poised for continued growth. This is why we believe we are the best positioned company in the media landscape. Now let me give you some more details about our first quarter results. As you heard, revenue came in at $3.3 billion. Advertising was $1.6 billion compared with $2.1 billion in 2016, which as you know, included Super Bowl 50 and an extra NFL playoff game. Also, last year, underlying network advertising was up a very strong 12% in Q1, and we nearly held all of that growth with underlying network advertising declining less than 1% this quarter. We also saw an improvement from Q4 just as we indicated on our last call. And as we head into this year's upfront, we feel confident in the strength and stability of our primetime lineup on CBS, which is once again America's most watched network. And as Les said, content licensing and distribution grew 16% in the quarter with strength across the board. Internationally, we saw a robust demand for new shows like MacGyver and Bull, as well as established hits like Hawaii Five-0 and NCIS: Los Angeles. Domestically, we got a lift from the syndication and streaming of our off-network programming, and we are also producing more originals for other outlets including the likes of Apple, Amazon and TBS and we continue to reload. During the quarter, our studio produced 20% more hours of original programming than last year, which will benefit us down the road. Affiliate and subscription fee revenue was up 17%. A big part of this increase was driven by retrans and reverse comp, which was up 28%, and our over-the-top services continue to become a growing part of this revenue source. Operating income for the first quarter came in at $704 million compared with $765 million last year which, as you heard, included Super Bowl 50 and the extra playoff game. Still, our operating income margin remained at 21%, driven by the growth of our high margin non-advertising revenue. Reported EPS from continuing operations was up 15% to $1.09 which included resolutions of certain state income tax matters that represented $0.05 of our EPS. So on an adjusted basis, our EPS from continuing operations was $1.04, up 9%. In addition, because of a new accounting standard, the first quarter included tax benefits from stock-based compensation awards which are now going through the P&L. Adjusted EPS including our Radio results was $1.06 for the quarter. Now, let's turn to our operating segments. Entertainment revenue for the first quarter came in at $2.35 billion compared with $2.59 billion last year which, again, included the Super Bowl and the extra playoff game. Without the impact of those non-comparable NFL games, the underlying business showed strong growth. More specifically, affiliate and subscription fees grew 28%, and content licensing grew 21%. Entertainment operating income for the first quarter came in at $398 million compared with $449 million last year, and our entertainment operating income margin held steady at 17% even as we invested in more content and our distribution services, thanks once again to the growth of our high margin affiliate and subscription fee revenue. In our Cable Networks segment, revenue for the first quarter was up 3% to $543 million with affiliate revenue up 6%. Much of this increase was driven by Showtime OTT, which benefited from the one-two punch of Billions and Homeland during the first quarter. And just as we're doing at CBS, we continue to invest in more programming at Showtime to drive further sub-growth, including our two new second quarter series Twin Peaks and I'm Dying Up Here. Cable Networks operating income of $248 million was up 9% in the first quarter, driven by our very profitable Showtime OTT service. And our Cable operating income margin expanded two points to 46%. In Publishing, Q1 revenue of $161 million was up 11% due to strong print sales. Audiobooks continue to grow at a fast pace and were up 35%. Best-selling titles during the first quarter included Unshakeable by Tony Robbins. Publishing operating income for the first quarter grew 8% to $14 million, and the operating income margin here held steady at 9%. Local Media revenue came in at $409 million compared with $448 million last year, once again because of the same two non-comparable NFL games. However, Local Media benefited from growth in retrans at our TV stations, and underlying revenue was up low single digits. And our Local Media operating income came in at $123 million for the quarter. Now let me give you a quick update on our Radio transaction. Our deal to merge CBS Radio with Entercom remains on track for the second half of 2017. We filed a CBS Radio S-4 a few weeks ago, and we're in the process of obtaining the necessary approvals from the various regulatory agencies. We look forward to recognizing the value of this business in the months ahead. Also in connection with our Radio transaction and in accordance with accounting rules, we made a non-cash adjustment to the carrying value of Radio to the current market derived by Entercom's stock price. As an asset held for sale, the value of our Radio assets will be marked to market until we complete this divestiture, and could be adjusted downward or upward from current levels. Turning to cash flow and our balance sheet, free cash flow was a terrific story during the quarter, coming in at $651 million, which is also net of a $100 million discretionary payment into our pension plan. This compares to last year's free cash flow of $889 million, which benefited significantly from our broadcast of Super Bowl 50. Also during the quarter, we repurchased 7.6 million shares of our stock for $500 million. As you know, first and foremost, our priority is to always reinvest in our businesses. Going forward, we will continue to return excess capital to our shareholders, including the value unleashed from our upcoming Radio transaction. Now let me tell you what we see ahead. For Local Media, total revenue is pacing to be up mid-single digits for the second quarter. And as a reminder in Q2, we will benefit from our broadcast of the NCAA Final Four games. We are also heading into the upfront marketplace in an extremely strong position. We have more eyeballs watching CBS than any other network. And as you heard, we were the number one network for the last nine years in a row. As measurement continues to capture more of the viewing that is taking place across platforms, our audience will only increase, which along with pricing gains will benefit us later this year. Retrans and reverse comp will continue to be a strong growth driver. We have 22% of our retrans footprint and 19% of our reverse comp footprint coming up for renewal through the end of 2018. And as you know, each new deal we do will raise the bar for the value of our content. And as Les said, we expect to grow our retrans and reverse comp revenue by approximately 25% in 2017. Our OTT services are also growing faster each quarter, and we've yet to launch our marquee franchises, Twin Peaks on Showtime and Star Trek: Discovery on CBS All Access, not to mention the first full season of the NFL coming up on All Access as well. So we expect healthy subscriber growth to continue. As you heard, 2017 is the year of the skinny bundle. This is a very profitable business model for us. And each new subscriber we add to these platforms will only accelerate our affiliate fee growth. We're also set for great success in content licensing. As Les mentioned, we have more than 200 episodes of CBS content coming up for domestic syndication, and that doesn't even include all the shows we're producing for Showtime, the CW, All Access, other cable networks, as well as streaming outlets. In total, we have more than 600 episodes of shows which have aired but not yet been licensed domestically, and thus the value yet to be realized. So there are plenty of licensing opportunities in our future, both here in the U.S. and in the international marketplace as well. So in summary, we're off to a great start here in 2017, and there's much more to come. The steps we have taken to transform CBS into a pure-play content company with a diversified revenue base are already having a big impact on our results. And the long-term strategy we laid out for you a year ago, anchored by our four pillars of growth along with the continued investment in new content and distribution platforms, position us for even greater success in the years ahead. We also have much more visibility into our future than we've ever had before, which is why we're so confident we will achieve our impressive goals. And as we do, we will continue to drive significant value for our shareholders. And with that, Gwen, let's open the lines for questions.

Thank you. And we'll take our first question from Ben Swinburne with Morgan Stanley. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: Thanks. Good afternoon, guys. Les, it seems like All Access has continued to be a strong growth driver. I think it's in your 20% growth of affiliate subscription revenues. Can you just talk about how that performed once the NFL season ended? I didn't know if churn spiked at all, how The Good Fight played. And it seems like you're getting close to 1.5 million or so of subs. I don't know if you're willing to humor us with a new disclosure, but I thought I'd try. And then I have a follow-up for Joe, a quick one. Leslie Moonves - CBS Corp.: I'm not going to give you an exact, but you guys knew. You're in the neighborhood. Look, we only had the NFL on All Access for the last two weeks, and it spiked a lot during those two weeks, which leads us to be very excited about having it for a full season, able to promote it. Similarly, with The Good Fight, we knew The Good Wife had done very well on SVOD. This was an even higher elevated form of that show. So every week that built, we were very pleased with the numbers and how it ended up, but once again, this is a big learning thing. The Good Fight was our first scripted drama there. And at the end of the day, we were extremely pleased creatively with it, and the numbers ended up really, really good. Obviously, we have the big kahuna coming up with Star Trek, but I think the strategy, not to think, we're fairly confident the strategy really is working well. It's very exciting as we move forward. Moving over to the Showtime, whenever there's a new show launched, when Homeland and Billions, there is a big spike on it. There's a big spike, and that led to a good strategy that we had, which is launching a new show every single month. And therefore, you get the spikes and you keep them. And as a result, the churn is lower. So we're really pleased with where we are, and the future is looking really great. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: Great. And, Joe, just on the Showtime/CANAL+ deal, I think you've done a number – I don't know if it's four or five of these. You've done a lot of these output deals. What is the financial benefit? Just remind us why that strategy makes sense for the company financially relative to selling off your shows on a one-off basis? Joseph R. Ianniello - CBS Corp.: Sure, the first thing it does, obviously it gives us a global brand in Showtime instead of selling individual shows. So now across the world everybody knows Showtime and what it stands for and again, obviously premium content. So that's first and foremost. But secondly, financially, right, from a risk profile perspective, these deals include past, current and future shows on Showtime, sight unseen. So basically the theory is if it's good enough for Les to put on Showtime, it's good enough for us. So that really changes the risk profile as we're developing these shows from creation to understand the revenue stream that's incremental, right, to the subscriber revenue. So the licensing opportunity at Showtime, because we own that, right, is in addition to the subscriber revenue which we never had before. Leslie Moonves - CBS Corp.: It's great. Just to add to that, it's great to see on the deal memo. It says Ray Donovan through its finale, then the substitute for Ray Donovan through its finale, then the substitute for the substitute. So it gives us great confidence that 10 years from now, we're going to be selling at great pricing these programs. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: Got it, thank you both. Adam Townsend - CBS Corp.: Thanks, Ben. Let's take the next question.

And we'll go next to Jessica Reif Cohen with Bank of America Merrill Lynch. Jessica Jean Reif Cohen - Bank of America Merrill Lynch: Thank you. A couple questions, just two, three maybe. One, now that the writers' strike has been resolved before I think it actually goes, what is the financial impact of the new contract? Second, you aren't in – part of the consortium that advertising consortium with Viacom, Fox and Turner. Do you think that impacts in any way how you can sell targeted demographics? And then you are part of Hulu which has now announced a launch date. Could you talk about your expectations for that? Leslie Moonves - CBS Corp.: For what? I didn't hear what the last one was. Jessica Jean Reif Cohen - Bank of America Merrill Lynch: The last one was Hulu. Hulu finally announced specifics. Leslie Moonves - CBS Corp.: Hulu. Hulu. Jessica Jean Reif Cohen - Bank of America Merrill Lynch: Hulu finally announced specifics. Leslie Moonves - CBS Corp.: All right. I'll talk about the writers' strike, and then I'll give the other two to Joe. Look, the writers' strike, we were all extremely pleased that we avoided the strike. We felt like the deal was extremely fair. It was appropriate for the industry. It also gave the writers some additional things that are writer-centric. A lot of the gains had to do with span. In other words, those shows that are less than 13 episodes, which frankly are on premium and they're on Netflix and Amazon more so than anything else, and frankly it is not anything that was not built into what we anticipated in the deal. As I said, it was a very fair deal. The writers got what they wanted, but you will not see an adverse effect to the bottom line with us, and we're very happy that it worked out. Joseph R. Ianniello - CBS Corp.: Jessica, I think your other two questions were some of those other consortiums on the data on measurement and stuff like that. So for us, look, I mean, all we've ever asked for is just to counter all of our eyeballs fairly. And when you do that, again CBS, the number one network, more eyeballs for the last 14 years and 15 years out of anybody. So we feel really good about that. So just because people are watching on different platforms or different timing just positions us. We know they're watching, and we know that. And so if there is any other – Nielsen is obviously making great strides in it. If there's others in there, so be it. But I think our opportunity is making sure we're getting paid fairly for all of those. But we don't have to necessarily own those distribution – that data, that measurement service. So I'm not sure if that answered your question, but I think that hits it. And as far as Hulu, look, we have great expectations. There are a lot of new entrants entering. I think obviously their bundle looks somewhat compelling. So I know it just launched yesterday. And I know a lot of folks signed up for it. But it's a great economic deal for us because obviously these new entrants pay the fair value kind of going in knowing what we deliver. And so the more and more subscribers they get, the better for CBS. Jessica Jean Reif Cohen - Bank of America Merrill Lynch: Okay, thank you. Leslie Moonves - CBS Corp.: Great. Thank you, Jessica. Next question, please.

And we'll go next to Alexia Quadrani with JPMorgan. Alexia S. Quadrani - JPMorgan Securities LLC: Hi, thank you. I guess just two questions. First, any further commentary you can give us on the overall ad market? We've heard such mixed things over the last couple of days. And I totally understand CBS is in such a strong position versus peers given your rating strengths going into the upfront, but I guess any color how you think you might do overall in terms of where you might end up there. And then second question's really just on the local station group. I heard you mentioned I think before that you might have interest in buying some more local stations with further deregulation, which we've seen some of already. I guess any information in terms of would you be interested in buying a sort of a larger group or just sort of one-offs in the markets where you really see value. Leslie Moonves - CBS Corp.: Yes. Alexia, and I know I sounds like a broken record every year at this time, but the upfront to me is going to be exceedingly strong. You start hearing numbers like high singles in CPM growths, and judging by – the scatter market once again remains very strong. There's a lot of demand for our product. So we're looking at a year where we think it's going to be much better than last year, and we had a very solid year last year. So I know I'm Mr. Broadcast and I'm the cheerleader, but I got to tell you I've been right – I sound like Donald Trump – I've been right more than I've been wrong in terms of those things that are going on. And so Carnegie Hall is two weeks away. And you know me, I get a kick out of what happens there during that whole process. But we're looking towards a very strong upfront. Joseph R. Ianniello - CBS Corp.: And, Alexia, just on your local station, look, I think we've demonstrated a very disciplined approach to M&A generally, but specifically for TV stations. So we'll always look at those opportunities. Obviously, the value of the underlying stations we own, we feel very good about. But we look at those kind of market by market specifically because our position is going in is we're going to get our value vis-à-vis the retrans negotiation or the reverse comp, because the stations need the major networks. And that's what's really driving their entire business model. So I think, again, we like to – what we say is have our cake and eat it too, because why else would you want cake if you're not going to eat it. Alexia S. Quadrani - JPMorgan Securities LLC: Thank you very much. Leslie Moonves - CBS Corp.: Thanks, Alexia. Let's go to the next question.

And we'll go next to Anthony DiClemente with Instinet Nomura. Anthony DiClemente - Nomura Instinet: Thanks for taking my questions. I have one for Joe, and one for Les. Joe, just on these deals with YouTube TV and Hulu, you can clear the economics per subscriber accretive to your existing retrans fees, let's say, either the same or better or let's say better. Can you talk about what's in those agreements in terms of planned annual increases? So for example, in your Hulu deal, will your per-subscriber fee increase in years two and three? And then your apps, still from DIRECTV NOW and Sling. So any update on those talks, and what the gating factors might be would be helpful? And I do have one for Les. Joseph R. Ianniello - CBS Corp.: Anthony, I think again, we can't get into any specifics about any of the deals, but I think you should assume there are pricing increases in all of our deals. I think the terms have to reflect the current market value we deliver, and I think we've now proven, we've been able to do this with multiple parties, not just one, not just two, not just three. So DIRECTV and Sling is ongoing. Those discussions continue, though they're complicated. They're new areas for those guys to enter into. And we're engaged and we'll see if we can come to a meeting of the minds on all deal terms. But it's complicated. So, but we're very encouraged with the new entrants in the marketplace and it seems to really be working, but we're again, as Les said, for a bundle – a skinny bundle to truly be successful, not to have the number one network with sports, entertainment, news. I mean, again, I'm not sure you're setting yourself up for success. Anthony DiClemente - Nomura Instinet: Okay. You guys were talking about deal memos before, so I thought I'd try there. Les, this is just maybe a high-level philosophical question. Facebook and Twitter and YouTube have been increasingly vocal about leaning into their ad-supported video strategies. Twitter having done a series of content deals recently, and Facebook having talked about their video ad revenue share model last night, really. So, the question is at a high level. Are there ways as you see those, are there ways that you could or should deepen or extend your relationships with those platforms in order to perhaps better share in their audience and advertising growth? And at a high level, what are your thoughts on making CBS content more available? And then we have some news in the late-night content on those platforms, but more available in order to participate in a, perhaps, shared revenue model. Thanks Leslie Moonves - CBS Corp.: Yes, look, you're right. At a very high level philosophically we are a content maker. We like to sell our content. We like to make – all sorts of different deals are going on. We are good at doing content. We're good at selling advertising. The answer is yes, we already have existing deals with some of those places you mentioned and that will continue to grow. I think what's happened is the realization that we're pretty good at producing content, and they have different skillsets and hopefully they can – we can be combined, and looking forward it will be a good – a new source of revenue for us. Anthony DiClemente - Nomura Instinet: Okay, thank you. Adam Townsend - CBS Corp.: Thanks, Anthony. Next question, please.

We'll go next to Mike Morris with Guggenheim. Michael Morris - Guggenheim Securities LLC: Thanks. Good afternoon, guys. Two questions. First, Les, you mentioned C7 as being the currency for most of the inventory in the upfront this year. When you think about being able to expand to C7, do you see the advantage there in maybe taking share within the television universe in terms of ad dollars available? Or do you see that as an opportunity to perhaps bring additional dollars into the television universe? And then second, Joe, you mentioned 20% more hours being – of television being produced at your studio versus last year. Where are those hours going? How should we think about the monetization of those? And what is kind of – how are you viewing a normalized growth level for that production? Thanks. Leslie Moonves - CBS Corp.: Mike, when I look at C7, and as I said, about 50% of what we're doing now is based on C7. The numbers between C3 and C7 are quite large, and they're growing larger every day as people get more and more choices and doing that. So the numbers that will come into the marketplace will be much higher, and this will be sound money. Basically, advertisers have been sort of getting those days for free in a lot of cases, and that's just not fair unless you're a movie company that is really time sensitive on what you're doing. So, I think the shift to that will bring new dollars into the marketplace, and certainly it will mean we will be counted more. There will be more viewers counted, and then you get beyond that, beyond C7, we have talked about, you know, dynamic ad insertion. Those numbers are growing quite a bit too literally where maybe beyond C7 you get 15%, 20% more viewers, which is another area of potential great growth coming up for us. So the idea is to capture all this, and I think it bodes well for the future. Joseph R. Ianniello - CBS Corp.: And, Mike, on the 20% more hours, obviously, look, we're doing more for CBS, CW, Showtime, as well as All Access. So first, obviously, we want to fill up the pipe as much as we can with our own content. But beyond that, again, we have the capacity to produce for others. And so that's good, they're all going to be profitable for us. So the theory being is the more and more stuff, intellectual property you own, it gives us licensing opportunities, it gives us subscription opportunities, and it gives us advertising opportunities, the three revenue types that drive our future. So it is the best ROI we can have, and so that's what the fuel is and that's why we always say first and foremost we're going to continue to invest in content. Michael Morris - Guggenheim Securities LLC: If I could, if we look at the 20% though, it's a pretty big number for an important part of the business. Joseph R. Ianniello - CBS Corp.: Yes. Michael Morris - Guggenheim Securities LLC: But in terms of your ability to increase that productivity, is 20% a run rate number? Is it somewhat unusual? Maybe how should we think about what you could do? Joseph R. Ianniello - CBS Corp.: It's still early, Mike. Again, Star Trek, we're developing those episodes right now for Star Trek. So once All Access gets some more original programming, it will obviously slow down from that 20-plus percent. But again, I do think, again, there's much more capacity to do more because the way it works, there will be a show runner, a writer, a producer. It will be a whole separate team that's doing it. We have to make sure that the outlets are there. So we have much more capacity in there. And again, the financial economics will easily be justified, but just for our own platforms, obviously that will slow down over time. But we're still in the earlier innings of the investment. Leslie Moonves - CBS Corp.: We obviously have a great team of executives, and Joe was saying we can expand our ability to do programming by bringing in producers and writers who are on the outside, and you bring them in, and that happens every year depending on the amount of production you have going on. In addition, on the network side, because of the strength of the international marketplace primarily, and also domestic syndication in SVOD, we can do more original programming during the year. So as reruns don't do quite as well, we plug originals in. And invariably, because of international domestic syndication, they can make money as well. That goes back to our summer strategy where we started producing original dramas, where we hadn't done before and we started with Under the Dome three or four years ago, and they're all profitable. So as part of that uptick in production, it's all profitable. Michael Morris - Guggenheim Securities LLC: Great, thank you. Adam Townsend - CBS Corp.: Thanks, Mike. Let's take the next question.

We'll go next to Doug Mitchelson with UBS. Doug Mitchelson - UBS Securities LLC: Thanks so much, so maybe just a series of quick questions, one by one. First, just to confirm, following up on what Alexia was asking about, I think Turner specifically said that going into 2Q they saw an air pocket in the national TV ad market, then it got better the last few weeks. Scripps today said the scatter market has gotten quite a bit better the last few weeks. Is that the rhythm that you saw, or did you see strength the whole way through? Joseph R. Ianniello - CBS Corp.: Doug, it's Joe. Look, I think the demand is there. Again, it's for the content. It's the beachfront property theory. I think we're seeing strong demand across the board, and scatter pricing is up double digits. And so we're seeing that continue. So we even see the slowdown in uptick over here. Doug Mitchelson - UBS Securities LLC: And, Les, this time every year when you figure out what your new schedule is going to look like, you're usually able to give us some visibility on what the entertainment cost growth will be for this schedule in the forward season. Any sense you can give us for next season based on the mix that you've come up with? Leslie Moonves - CBS Corp.: It's still a little too early. We're still looking at pilots. We haven't even had our first scheduling meeting. I have an idea of three or four of the shows that are going to be slotted in there. But generally speaking, Doug, the amount that we're spending is usually not up very much. It's usually low singles, and we're able to recoup that revenue. So it's not at all a concern. Doug Mitchelson - UBS Securities LLC: And the last question for me, just help with the U.S. syndication market. You mentioned in the press release putting several shows into syndication later in the year. We've gotten some feedback occasionally that the U.S. scatter market – syndication market is a little spotty. I think on this call you've mentioned it's healthy. I just was hoping for more details on the health of the U.S. syndication market right now. Joseph R. Ianniello - CBS Corp.: Look, Doug, I just think again we're talking about off-network premium content, first-cycle availabilities, and if you're one of the hundreds of cable networks out there looking for that kind of premium, this is where we fish. And so we're feeling very good about that because again just go back to the business model of what they need. They have very healthy margins, but that stability in scheduling that gives them advertising revenue opportunities, gives them affiliate fee opportunities. So there are a lot of cable network. They talk about originals because that's the sexy thing to do. But their bread and butter is still off-network premium content, and guess what, we have three top shows coming to market later this year. Doug Mitchelson - UBS Securities LLC: Thanks so much. Adam Townsend - CBS Corp.: Thanks, Doug, next question.

We'll go next to John Janedis with Jefferies. John Janedis - Jefferies LLC: Thanks. I've got one for Joe, one for Les. Joe, just back to your point around beachfront property, do you think there's a decoupling in ad demand between cable and network television given reach? And where do you think the market is in terms of the shift of demand from digital back to TV? And then for Les, on the programming front, your renewal rate of the primetime lineup has improved over the past couple of years, particularly for new shows and much better than peers. So what's changed in terms of the process? And does that allow for less pilots for the network itself and more modest programming expense growth than what I maybe consider the broader industry is experiencing? Joseph R. Ianniello - CBS Corp.: John, it's Joe. I'll go first. On your question about advertising, I think yes. I think, look, I think you're seeing different tiering packages going on at subs, so for cable nets. And I think the reach will separate the men from the boys, as Les said in his prepared remarks. And again, I think we stand out even more than that. And so I do think there will be a shift of those dollars on where they go to find those eyeballs because again, we'll have more reach just based on the distribution platform of that. And when you start talking about digital, I think obviously that will be competitive with cable. But compared to us, there's obviously going to be a shift, a flight to quality is what the way we like to say it. You know what you're going to get when you have an ad on CBS's schedule. It's that strength and stability, so advertisers should pay a premium for that. And so I think we're seeing lots of instances where I think people are absolutely shifting. We're not saying they're doing it and cutting digital entirely, but clearly a shift of the mix between digital and re-looking at that allocation, if you will, gives us a big opportunity from where we sit. Leslie Moonves - CBS Corp.: John, I've been doing scheduling a long time, and it gives me an advantage of not only looking at this season but looking two, three years out in advance. And this year, you're right. We did less pilots because we picked up 18 shows that are coming back. And that stability allows us to do fewer pilots than most of our competitors, and also target those pilots. In other words, these pilots we sort of know going in where they might go, what could happen with them. Obviously some of them don't work. Some of them are terrible. But the good news is I know right now we have enough to – we're going to be in very good shape come two weeks from yesterday in Carnegie Hall. The planning process has been helpful, knowing what we know, the fact that we picked up those shows a couple of months ago gave us a very good head start and it also, as I said, targeted our pilots. So we only did eight dramas and eight comedies, which is a few less than we normally do. And, as a result, we've been able to control costs in addition to our returning shows, we're able to control costs on them as well by adding or subtracting certain elements to the show. John Janedis - Jefferies LLC: Thank you. Adam Townsend - CBS Corp.: Thanks, John. Next question, please.

We'll go next to David Miller with Loop Capital Markets. David W. Miller - Loop Capital Markets LLC: Yes. Hey, guys. Congratulations on the stellar results. Joe, thanks for calling out the scatter kind of bogey there with up double-digits. How does that translate in terms of right now, where is scatter over scatter versus where you were last year? Then I have a follow-up. Thanks. Joseph R. Ianniello - CBS Corp.: Yes. It's up slightly, but it's all about, David, the upfront. The season is essentially over. We're sitting here May 4. It's over in a couple of weeks. So this is all about negotiating with advertisers about the upfront. So I think again, when we look back at the scatter, I think everyone would say the broadcast year, scatter was very strong. That's what leads us to believe that the upfront marketplace should be very strong. Because, remember, when they're buying in the upfront, they're buying at a discount to what they just were buying this month. David W. Miller - Loop Capital Markets LLC: Yes. Right. Right. Okay. And then, Les, I could very well be wrong here in this assumption, but I get the sense that there's somewhat of a friendly debate going on within CBS about what you guys may want to do about the Thursday night football package, given that you have one more season left. I obviously understand the promotional mojo associated with the package. That being said, it does feel like the rights costs associated with the package are inordinately high. And I'm wondering, what has to happen for you to feel good about renewing the package and when do you think you'd make that decision? Thanks a lot. Leslie Moonves - CBS Corp.: Our Thursday night package, as I mentioned, is significantly stronger. It's frankly, the strongest one we've had in a number of years, and scheduling-wise it came in the first five weeks of the season, and we really like the hand we were dealt this year. David W. Miller - Loop Capital Markets LLC: Yes. Leslie Moonves - CBS Corp.: Yes, yes, it is costly. However, we're anticipating that we want it to go on. We would be interested in renewing it. The NFL is still the best game in town, as you said. It adds all sorts of other things to a network lineup. Look at what NBC would be without Sunday night football and Thursday night football. It helps an awful lot to have that in primetime taken care of week-after-week. So we hope to continue. We love our relationship with the NFL and we'd like to renew it. David W. Miller - Loop Capital Markets LLC: Okay, thank you very much. Adam Townsend - CBS Corp.: Thank you, David. Next question, please.

We'll go next to Laura Martin with Needham & Company. Laura Martin - Needham & Co. LLC: Hi, guys. Maybe a couple digital questions. So one of the things you said in your prepared remarks, Les, is that you're ahead of the 8 million combined subs by 2020, and at the same moment you announced that you're going to bundle together for the first time Showtime OTT and CBS All Access. So can you talk about the economics of that and if you're already ahead of your goals, why would you presumably price discount by bundling the two together? Leslie Moonves - CBS Corp.: We are ahead of our goals and we said we have two terrific offerings here. Why not put them out together? They will be discounted, but not a great deal. Not a great deal. It just makes sense. It just makes sense to have them there together, and they're both topnotch products and it's not about pricing as much as convenience. Joseph R. Ianniello - CBS Corp.: Yes. And, Laura, I would just add, obviously you talk about churn. That's what you've got to think. It reduces churn. So it's really, again, we're looking at net effective, not just the consumer who just comes and then leaves. We're looking that as a longer term where there's something in it for everybody, so you stay longer with the package. So we reduced churn that has a tremendous amount of value. Laura Martin - Needham & Co. LLC: Okay. That's helpful. And then moving philosophically to Facebook and Snap. These guys are basically saying, because we cover both, they really want to do rev share for the premium content companies. And philosophically, how do you feel about doing rev share for premium content on these massive, young, skewing young platforms that are digital and global? Leslie Moonves - CBS Corp.: I think obviously we have to look at it. We have to look at it. It depends what the rev share is, and it would be silly of us to ignore Facebook and Snapchat and the way they want to do business. And we are opening to considering it. Once again, they do need premium content and that's what we do provide and we are open to any sort of deal. Laura Martin - Needham & Co. LLC: Okay, that's interesting. And then my last thing, I don't know if you're willing to give us this. You guys have now had the ad-free CBS All Access for some time. So we put in print that no one's going to pick that up. Are we wrong, Les? Does anybody actually picked up – like, are they paying to skip ads on CBS All Access? Leslie Moonves - CBS Corp.: Oh, yes. Oh, yes. There's a decent percentage that is doing it. It's $4 difference a month, but we're seeing some success with it. We're seeing some success with it. It's considerably less than 50%, but there are people that like it. You know, it's still only $9.99. We still think it's a very, very valid product for $9.99 ad-free. Laura Martin - Needham & Co. LLC: And you do keep a really good track of your demos. Like you said that one of your products, the news product, was 20 years younger. What is the demo on the CBS All Access these days, in terms of compared to the CBS primetime? Joseph R. Ianniello - CBS Corp.: Yes. No, it tracks like news, Laura. It's about 20 years younger. It's almost 50-50 male female. So again, it's starting to replicate broad appeal, and that's why – that's will drive the programming strategy as well. Leslie Moonves - CBS Corp.: Yes. We're still – once again when we got football, obviously we will get somewhat more male. Star Trek will bring us even younger. The Good Fight was older more female. So all these things once again we're learning a lot. Laura Martin - Needham & Co. LLC: Okay. Perfect. Thanks, guys. Very helpful. Thanks. Leslie Moonves - CBS Corp.: Thank you, Laura. Joseph R. Ianniello - CBS Corp.: Thank you. Adam Townsend - CBS Corp.: Next question, please.

We'll go next to Steven Cahall with RBC. Steven Cahall - RBC Capital Markets LLC: Yes. Thank you. First on advertising, I was just wondering if you could talk about the opportunity to deliver targeted advertising, particularly whether you're on Hulu or YouTube or on All Access through the inventory that they're going to have or just through the advance of technology into digital. We have heard that's like a 20% higher CPM, so maybe when can we expect that to be a reasonable amount of ad inventory? And then secondly on the broadcast side, you talked about being disciplined in terms of looking at the market in terms of station M&A. Is there any point where you might see consolidation to a point where you need to do something defensive? I think we've seen one of your peers possibly have to think about that. So if the cap were to, say, go to 50%, is that something you have to think about? Thank you. Leslie Moonves - CBS Corp.: I'll answer the second question first, and – we don't view that. Look, these stations, the majority of their money is made by network content. It's still the best game in town. Once again, you're talking about a place where there is a battle over affiliates of a specific network group. We view the stations as a very profitable business. We like the business. If there is an opportunity for us to get something that makes sense for us, it is okay. But we don't feel a need to go out and acquire a large station group. Once again, they still have to come to us for our content. We still have the NFL. We still have Big Bang Theory. We still have NCIS. We still have 60 Minutes. So as this consolidation goes on, we're watching it with interest. We wouldn't mind owning more stations, but only if it's cost effective. Joseph R. Ianniello - CBS Corp.: And, Steve, on your advertising question, yes, look, I think digital, it provides us an opportunity to grow our advertising revenue. And obviously we laid that out a little bit in – on one of our pillars, and so the more targeted you can be on these digital platforms, you get younger, right, you get more data about that real specific kind of point-of-purchase stuff. So obviously there should be a CPM increase, and we can just debate is 20% the right number or not, but I think again it positions us for even further growth, which again gives us confidence that we're going – we have larger audience targeted to more specific younger demos. So that – I don't know. That feels like upside to me. Steven Cahall - RBC Capital Markets LLC: Thank you. Adam Townsend - CBS Corp.: All right. Thanks, Steve. Gwen, let's take one final question.

And we'll take our last question from Marci Ryvicker with Wells Fargo. Marci L. Ryvicker - Wells Fargo Securities LLC: Thanks. Since we're sort of on the topic of Fox, if Fox and Blackstone actually win Tribune, Les, how do you feel about Fox more or less owning or running CBS affiliates? And then I guess somewhat related to this, has there been a situation where CBS has denied a transfer of the CBS affiliation between station groups? Leslie Moonves - CBS Corp.: Number one, we don't have a lot of Tribune stations. CBS stations are Tribune, so if Fox buys it, they can come to our affiliate meeting and they'll have a very good time there. They'll be very welcomed. I'll have Rupert up on stage with me. It'll be fine. So it won't affect us at all. We have never blocked a station sale from going through. We have negotiated when we had the opportunity, when some of the contracts said they had to negotiate. Although those usually aren't in contracts anymore because of what the marketplace is. But we deal with affiliates across the board and if we continue to do what we're doing, we see how much money stations are making, we know they are delivering back to us part of that money that they're getting in retrans, in reverse comp, but we also know they're dealing with great margins because of us. So anybody who buys stations, big, small, we are happy to be in business, and I think they're very pleased with being a CBS affiliate. Marci L. Ryvicker - Wells Fargo Securities LLC: Got it. Thank you. Adam Townsend - CBS Corp.: Thank you, Marci, and thank you, everyone, for joining us. Have a great day.

Thank you, everyone. That does conclude today's conference. We thank you for your participation.